Germany – A Safe Haven for Buy To Let Investment

Germany has long been a nation of renters, with German nationals happy to rent their homes rather than buy them, with the responsibilities property ownership brings.

This has long meant relatively stagnant property price growth over the years when compared to other developed economies around Europe and the world.

However, things are beginning to change in Germany.

Increasing population from immigration into Germany from the former East Germany and other EU member states has increased demand for housing, and with construction struggling to keep pace with demand, prices have been rising.

Average annual property price growth of 5.6 per cent over the last five years is double that seen previously since 1970. This growth has been seen particularly in urban areas where young people increasingly want to live in or near cities for work and access to leisure.

Berlin as the capital city is of course a very popular rental hub. Frankfurt too, has seen prices of new-build apartments rise 59% since the beginning of 2008. According to research institute Empirica, advertised prices in the top 7 cities rose 14.5% in 2015, the highest increase since the millennium.

In addition to the increase in population in Germany, interest rates are at an all-time low, making the financing of property purchase that much more affordable.

Overseas property investors are also flocking to Germany, attracted by the realtive economic stability of the country when compared to many others in the Eurozone during these uncertain times. Indeed, property price growth in Germany has begun to outpace the UK.

Berlin has become a particular favourite for buy to let investors, with rents on first-time lettings up 4.2 per cent and rents on re-lets up 5.1 per cent in the last year.

Property demand is rapidly growing in the capital, with over 132,000 extra households created in 2016 alone. With Germany showing net immigration of 750,000 it is little surprise that so many gravitate to Berlin, and there is no sign of this additional housing demand abating.

Construction is accelerating, however still only 28,000 new residential properties were added in Berlin last year, nearly 100,000 short of the additional demand.

The combination of the increase in demand and a still limited supply is currently creating an exciting investment environment.

With a strong economy and no plans to increase interest rates in the near future, the property market in Germany is becoming very attractive to overseas property investors looking for a safe haven for their funds in an unstable world.